The Rise of Flat Rate Pricing in Ride-Sharing & Why It Matters for Parking

Ride-sharing apps have been in the news a lot lately, often making headlines on the autonomous car front. But there’s another trend you should be taking note of: flat rate pricing.

In this article, we take a look at why this pricing structure matters for the parking industry.

Ride-sharing as you know it is changing

Today, ride-sharing is common across the country, with millions of people hailing rides from their phone. Depending on what city you’re in, there’s a range of offerings, from carpools and private rides in driver-owned cars to taxis and black car service.

Uber and Lyft own a sizeable piece of the pie, but there are other players in the space. Via is worth noting due to their flat rate pricing structure. Flat rates allow passengers to ride within a specified zone for a set price, often sharing the vehicle with other passengers. Via introduced this concept to ride-sharing in NYC with $5 rides anywhere throughout Manhattan–a shockingly cheap mode of transportation.

Uber is testing flat rate packages in three cities as part of a competitive price war going on between the ride-sharing services. Shortly after we published this piece, Lyft joined in and is now offering flat rate passes as well.

This is typical of what we’ve observed in Chicago, with Uber, Via and Lyft all undercutting not only each other but also public transit, in order to win over commuters and other people looking to get around the city.

For example, this is part of Via’s marketing campaign targeting commuters, convincing them to use Via rather than the train:

This ‘flat rate fare’ trend matters because pricing is aggressive, making ride-sharing more affordable and potentially even more of a threat to parking.

Flat rate pricing is sweeping the ride-sharing industry

Flat rate pricing and packages vary by company and city. To give you a general sense of this latest trend, we’ve outlined the flat fare basics from Uber, Via and Lyft:

Uber’s unlimited flat fare packages

Select riders have been given the opportunity to try Uber’s pilot program of flat fare packages for uberPOOL, and in some cities, uberX. Riders pick one of two packages, up to 20 rides or up to 40 rides, good for 30 days after the purchase date. Then they request their uberPOOL or uberX as they normally would, and ride within the flat fare zone at a flat rate.

Pricing is aggressive in Uber’s flat fare markets: New York, San Francisco, and Chicago. For example, in Chicago, it only costs $2 per ride with uberPOOL, plus $1 in fees (when you break down the upfront fee per ride). This comes out to $6 for a round trip commute.

Uber is marketing these flat rate packages as exclusive and limited across the three markets.

Via’s flat rate fares

Via offers a more premium experience in a black car or SUV. To get the lowest flat rate fare, Via members purchase credits before hailing a ride. If riders don’t want to buy credits in advance, they can also choose to pay per ride, which costs more per trip.

Similar to Uber’s flat fare program, riders can only ride within specified zones. Pricing varies by market but is competitive with Uber and public transit.

Here’s another example of Via’s marketing campaign, this time emphasizing rides in Chicago for $3.95:

Lyft’s flat rate fares

Lyft is the latest ride-sharing service to offer a flat fare package, and the terms are identical to uberPOOL’s flat rate program. For a limited time, passengers can pay $20 for a flat fare pass to get $2 Lyft Line (carpool) rides, up to 20 rides. This package of 20 rides is good for the month of November only. Flat fare passes can be used in Los Angeles, San Diego, Miami, Chicago, Atlanta and DC.

Similar to Uber’s strategy, Lyft is marketing these as exclusive, limited time passes.

How is flat rate pricing a threat to parking?

Flat rate pricing competes against daily and monthly parking rates, and in many cases, it undercuts public transit. So what does that mean for parking? What would you have to charge to compete with flat rate ride-sharing for price-sensitive customers?

Here’s a quick breakdown by city of approximate costs for the daily commuter using a flat rate ride-sharing package:

In New York, if you want to win over a price-conscious commuter, you would need to beat $5 per day. As of today, this offer is only valid in Manhattan, but we can assume it will expand.

In Chicago, if you want to win over a price-conscious commuter, you would need to beat $6 per day. Passengers can now take advantage of this rate from either Uber or Lyft.

In San Francisco, you would need to beat $8 per day in order to win over a price-conscious commuter.

In DC, you would need to beat $5.90 to win over a price-conscious commuter.

In Los Angeles, Atlanta, San Diego and Miami, you would need to beat $6 to win over commuters focused only on price.

This begs the question: are these prices realistic for parking? In most cases, probably not. We understand that you can’t lower rates to compete directly with flat rate pricing. So what can you do?

Parking can compete with convenience

If parking can’t always compete on price, where can we add value for commuters and in the transportation space generally? What is our core offering? The answer is convenience.

There’s nothing as convenient as driving your own car. You can leave when you want, take the route you want, and don’t have to pick up other people along the way.

To that end, ride-sharing isn’t without its inconveniences. Passengers have to deal with wait times, driver availability, a longer commute due to pooling, and zones of operation.

But where ride-sharing does compete–and this should not be overlooked–is on the mobile front. We know that 50% of all transactions will be mobile by 2020. Consumers expect mobile convenience and a seamless experience. If more cost-effective and convenient alternatives exist, like ride-sharing, drivers may be tempted to look elsewhere for transportation.

The good news is parking can play that game, too. While it may be nearly impossible to lower your rates to win over the price-conscious commuter, you can make parking just as convenient as hailing a ride by bringing your facilities online. An easy way to test the waters is with parking reservation platforms, which list your inventory, make rate recommendations that maximize revenue, and handle customer service.

While flat rate ride-sharing is only available in select cities now, the list of markets is growing, and we can assume they are looking to expand further. Now is a critical time to be reaching more convenience-conscious drivers.